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What Is a Prepaid Secured Card and How Does It Work?

3 min read

Do Prepaid Cards Build Credit?

Written By

Justin Stewart

Prepaid credit cards and secured credit cards are generally two different credit card card types. They’re both great options for Canadians who have little, no, or damaged credit and they both have pros and cons. Here’s a basic breakdown of the two and how they work.

Prepaid credit cards

Prepaid credit cards are similar to debit cards. You load them with your own money and pay for things as you would a chequing account. The difference is that prepaid credit cards work on credit card networks – in the case of KOHO, the Mastercard network. That means your KOHO card is accepted anywhere Mastercard is, including online and overseas.

Secured credit cards

Secured credit cards are similar to traditional credit cards. You’re given a credit limit and can spend up to that limit. The difference, though, is that your limit is determined by a deposit you have to make. You’re also expected to pay down your balance each month, similar to a traditional credit card. Secured credit cards allow you to build credit over time, which makes them a popular option for those who don’t have credit or who have damaged credit.

Does a Prepaid Credit Card Build Credit?

Typically, using prepaid credit cards won’t help you build credit. However, KOHO prepaid cards are different.

KOHO cards are packed full of features, like cash back, earned interest, and, you guessed it, credit building. There are two ways you can build credit with KOHO: either with a line of credit from us or with your own secured line of credit. You can consider KOHO cards a bit of a hybrid of both prepaid credit cards and secured credit cards, since they offer the best of both worlds.

Here’s how building credit with a secured line of credit works with KOHO:

  1. Set aside funds as a secured line of credit in your KOHO account, from $30 to $500.

  2. Withdraw what you need; we’ll re-collect what you owe at the end of the month.

  3. Every on-time repayment builds credit history and could help your score.

How To Get A Secured Credit Card

Secured credit cards are fairly simple to get. Here’s the typical steps you would take:

  • Choose a reputable financial institution or bank that offers secured credit cards.

  • Provide a security deposit, usually ranging from $200 to $500 or more, which becomes your credit limit.

  • Complete the application, which often includes a credit check.

  • Once approved, you'll receive your secured card.

  • Over time, responsible use can help you build or rebuild your credit history.

Getting a KOHO card is a little easier, since there are no credit cheques required and no deposits or minimum balances. All you have to do to get KOHO prepaid Mastercard is choose the account you would like and sign up. And it only takes a few minutes.

Are Prepaid Cards Safe to Use?

The short answer is… yes! Prepaid cards are safe to use and, in many cases, might be safer to use than your regular debit card or credit card.

With KOHO cards, your money is insured for up to $100,000 with CDIC insurance – so you never have to worry.

They can also be safer to use than credit cards if you have had issues with overspending. Since the money you have access to is yours, and not credit, you’ll never be in danger of spending beyond your means.

When Should I Use a Prepaid Card?

You can use your prepaid card as much or as little as you’d like. Here are some things you can do to get the most out of yours:

  • Choose a prepaid card, like KOHO, that offers rewards like cash back.

  • Keep an eye on your balance and always make sure it’s topped up.

  • Take advantage of your card’s perks. With KOHO, you have access to Credit Building, Cover, cash back, earning interest, and budgeting tools.

  • Speaking of budgeting: make sure to create one and stick to it.

  • Link your prepaid card to your online subscriptions to earn even more cash back.

Building Credit With a Prepaid Secured Line of Credit

KOHO makes it super simple to build credit history with a prepaid credit card. We offer two ways to do it (you can even choose to use both to really supercharge your credit building). When you sign up for Credit Building, you’ll also get access to a financial coach and your credit score, on demand, so you can make sure you’re always on the right path.

Note: KOHO product information and/or features may have been updated since this blog post was published. Please refer to our KOHO Plans page for our most up to date account information!


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The KOHO Mastercard® Prepaid card is issued by KOHO Financial Inc. pursuant to license by Mastercard International Incorporated. Mastercard and the circles design are registered trademarks of Mastercard International Incorporated.

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